Housing for All by 2022 - The Clock is Ticking...

Affordable housing is
not just about providing homes to the lower-income strata of society, though
that is what the Modi government's avowed intention behind the 'Housing for All
by 2022' doubtlessly is. Affordable housing creation also has a direct and favourable
correlation with the nation's economy, as well as most other real estate
segments.

Housing for lower-income wage earners increases the economic strength
of any city or region, as it attracts inward migration which creates a bigger
manpower pool.

This, in turn, boosts
the viability of opening up industries and businesses in the region,
translating into more demand for commercial real estate spaces. Formal and
informal retail is also attracted to residential catchments, translating into
consummate demand for retail spaces in and around such catchments.

Finally,
affordable housing in India coexists quite benevolently and beneficially with
mid-income housing, as the middle class invariably depends on the services of
lower-income earners to keep its show going, so to speak.

In cities like Mumbai,
lower-income housing existing alongside the super-expensive abodes of
ultra-HNIs is also not considered an anomaly.

The fairly recent trend of 'gated
communities' perhaps seeks, to some extent, to reserve the properties within
its perimeters to a certain level of networth families - but even in
such projects, we see low-cost housing sprouting up almost as a logical
consequence all around them.

The critical
importance of affordable homes is doubtlessly an immutable truth in any country
and its economy. In India, affordable housing has definitely played this role
and will continue to do so.

However, there has in the past also been a more
sordid side to the story. While there were also reputed national players active
in this segment, affordable housing in India has historically been the playing
ground of smaller, non-established developers who did not follow any particular
rule book.

Their modus operandi
was to buy small land parcels on the outskirts of cities and in gram panchayat
areas, and build very basic housing projects bereft of any but the most
rudimentary facilities and amenities. The plots they favoured were invariably
in areas which, because they fell outside municipal limits, did not have proper
water and electricity or even road connectivity.

Worse, such builders often did
not have all regulatory clearances and permissions for their plots and
projects.

People bought homes in
such projects because the quoted ticket sizes were attractively low - often so
low that they would have aroused suspicion with more informed buyers. Such
developers banked on the fact that their target clientele was extremely
cost-sensitive and usually not up to speed on regulatory matters.

The 'amnesty schemes'
that the Government rolled out to 'regularize' such housing projects for a
certain fee justifiably drew ire, as such schemes seemed to encourage the
development of illegal housing projects.

Without a doubt, many fly-by-night
developers benefited from these schemes in the past and even banked on the
possible option of resorting to them when the demolition hammer finally loomed
over their projects.

The arrival of RERA
has put paid to such underhanded activity, and only strong developers in the
formal housing sector will prevail even in the affordable segment. This
includes well-established local players with good track records for timely
completion and quality standards.

The breed of fly-by-night operators who
looked at affordable housing as a means to make a quick buck will now be driven
off the market.

The Government has
also rolled out various incentives to boost affordable housing. To begin with,
the GOI designated this vital sector as a favoured segment under its Housing
for All by 2022 initiative.

This led to affordable housing graduating from
being the poor second cousin of Indian real estate to a highly influential
sector. The most recent Union Budget provided direct tax relaxation to the
lowest income earners, along with much-needed clarity on the designated beneficiaries
under the Pradhan Mantri Awas Yojana (PMAY).

The Government also
brought in a new Credit Linked Subsidy Scheme (CLSS) for the middle-income
group, with a provision of INR 1,000 crore. Additionally, the extension of
tenure for loans under the CLSS of Pradhan Mantri Awas Yojana (PMAY)
was increased from 15 to 20 years.

Finally, affordable housing has also been
accorded the very important infrastructure status, ensuring that developers in
this segment have access to cheaper loans and various other incentives to
encourage them to pitch in and drive supply.

Having emerged as a
preferred segment for housing finance institutes, affordable housing is now
also attracting the interest of more developers who had previously shunned it
because of its 'down-market' image. Today, affordable housing has become a
respectable segment and the Government's determined push towards creating it
across the country in sufficient numbers, it now plays a very important role in
the housing finance sector.

That said, whether the
Government's vision for Housing for All by 2022 is realistic and implementable
to its intended extent is still a big question mark. Definitely, it seems
impossible if enough land is not released for the creation of affordable
housing. Various Government agencies such as the Indian Railways do, in fact,
hold sizeable land parcels which could logically be deployed for this purpose.

Land is a very
price-sensitive commodity, and its current shortage in major city-centric areas
prevents the development of affordable housing in areas where it is most direly
needed. The cost of land currently accounts for as much as 30-50% of the cost
of a project within city limits. However, RBI regulations do not allow banks to
fund land purchase.

Developers, therefore, are left with only a few options.
They can either form a joint venture (JV) with the land owner, or get funded
through NBFCs - usually a very expensive route, which again precludes the
prospect of developing affordable housing on the acquired land.

This is not the only
area that needs to be looked at seriously. The lower-income groups also need
access to housing loans to a much greater extent that the PMAY scheme offers.
In the first place, awareness about this scheme among those whom it intends to
benefit is seriously lacking. Also, the tedious KYC norms need to be relaxed
for low-income, informal sector buyer who has the most pressing need for
housing.

Above everything else,
the obvious need of the hour to unravel the Gordian knot of complexity
surrounding affordable housing in India is concentrated political will.

Going by its existing
track record, the current Government is definitely capable of making the
required push - and with Government-held land being matter of public record, of
deploying the necessary land resources.

The demonetization move and rolling out
of RERA and GST are ready examples of a degree of political will which has, in
many respects, not been evidenced in India before.

Will we see the
Government make yet another series of determined moves to fulfil its vision to
put a roof over the head of every Indian citizen? Only time will tell - but if
we take the '2022' in its Housing for All vision as any kind of deadline, the
clock is definitely ticking...

Housing for All by 2022 - The Clock is Ticking...
Reviewed by S. Chitra
on
June 05, 2017
Rating: 5 Housing for All by 2022 - The Clock is Ticking by Mr. Anuj Puri, Chairman - JLLR (JLL Residential) Affordable housing is not just ...